Politics over Finance at the Vatican: The Status Quo Vanquishes a Reformer

Late in 2015, Cardinal Pell hired PricewaterhouseCoupers to conduct a comprehensive audit of the Vatican’s finances. Beforehand, he had hired McKinsey to do a review of assets; that company found a total of €1.4 billion (about $1.6 billion) “tucked away” off the books.[1] Other church officials, led by Cardinal Pietro Parolin, the Secretary of State, let Pell know that the audit wouldn’t happen. This was a setback for the financial overhaul that Pope Francis had charged Pell with wide authority to do a thorough job. That pope had been given the mandate to clean up the Curia, as the last pope had resigned amid allegations of “cronyism, inefficiency and corruption.”[2] So why did Pope Francis take Parolin’s side in scrapping any audit even though that pope had given Pell the o.k. to have it done?

The full essay is at "Politics over Finance at the Vatican."

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[1] Francis Rocca, “Vatican Finance Chief Runs into Resistance,” The Wall Street Journal, September 8, 2016.

[2] Ibid.

Going to Extremes for Economic Growth: Low Interest-Rates as Unfair and Unwise

Is moderate monetary policy better than going to the extremes? The same can be asked of fiscal policy. Moreover, is a hypertrophic urge to prompt economic growth as if it were an end in itself better than seeking an economic equilibrium? Generally speaking, systems in equilibrium are more stable than those that include a schizogenic, or limitlessly maximizing, variable. An example of the latter is the population growth of our species relative to the equilibria otherwise established by the ecosystems in which we live. A desire for economic growth is a maximizing variable in a political economy. So too is the related practice of taking monetary (and fiscal) policy to an extreme. If the desire is great enough and the related policies extreme enough, the equilibrium of a political economy can be punctured with systemic risk increasing as does the instability of the system. I contend, therefore, that moderate government and central bank policies are preferable to going to the extremes. Here, I address monetary policy.

The full essay is at "Going to Extremes."

Brazil’s Rousseff Impeached and Removed from Office: A Case of Partisan Politics?

Dilma Rousseff was impeached and removed from office at the end of August, 2016. The state’s senate voted 61-20 to convict her on charges that she used illegal bookkeeping maneuvers to hid a growing budget deficit.[1] Her defense that she did not enrich herself through public office—that she did not steal public money for her own account—can be regarded as an attempt to deflect the legislators from the existing charges.[2] Only 56 legislators were necessary for a two-thirds majority. Given the problems of hyperinflation and fiscal mismanagement, including a growing public debt, her offenses were “deemed an impeachable crime.”[3] Although Brazil was hardly the only country where the chief executive has sought under political pressure to make a budget deficit look smaller than it actually was, enforcing deterring consequences even just in this case is laudable—while other, partisan motives, detracted from the vote’s legitimacy.

The complete essay is at "Partisan Impeachment in Brazil?"

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1. Paulo Trevisani and Reed Johnson, “Brazilian President Rousseff Ousted,” The Wall Street Journal, September 1, 2016.

2. Ibid.

3. Ibid.

Apple Owes Back-Taxes in the E.U.: Blame Ireland or Apple?

The European Commission issued a formal decision on August 30, 2016 that the state of Ireland “recoup roughly €13 billion ($14.5 billion) of unpaid taxes accumulated over more than a decade by Apple, Inc.”[1] The decision “shows companies could be on the hook for past behavior and potentially be handed big bills for allegedly unpaid back taxes.”[2] E.U. law “forbid companies from gaining advantages over competitors because of government help.”[3] This applies both the federal government and the state governments, so the law could be better stated as, “No state government shall help companies gain advantages over their competitors.” Presumably Ireland’s government made the offer of help, rather than Apple getting that government to comply with the company’s wishes. If so, the state government rather than the company should be held responsible. Put another way, if Apple’s board and management considered the Irish offer to be legitimate at the time, Apple should not be held to pay the back taxes; rather, the state government should pay a penalty to the Commission.

The full essay is at "Ireland or Apple?"

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[1] Natalia Drozdiak and Sam Schechner, “$14.5 Billion Irish Tax Bill,” The Wall Street Journal, August 31, 2016.

[2] Ibid.

[3] Ibid.

Going Off-Shore, Dodging Sanctions, and Laundering Money: The World of the Richest of the Rich

On April 3, 2016, 2.6 terabytes of data—more than 11.5 million documents—leaked from Panama’s law firm, Mossack Fonseca. The documents show that the firm “helped heads of state, oligarchs and celebrities launder money, dodge sanctions and avoid taxes.”[1] Over 40 years, 214,000 offshore shell companies in 200 countries implicate individuals including the family of Syrian President Bashar Assad, and that of British Prime Minister David Cameron, several friends of Russian President Vladimir Putin, and Icelandic Prime Minister Sigmunder Gunnlaugsson; financial institutions implicated include UBS, HSBC, and Société Générale.[2] I contend that the markets themselves had been tilted in the interest of the greater power (i.e., the rich), so systemic rather than incremental or piecemeal efforts would be necessary to solve the problem.

The full essay is at "Going Off-Shore."

The E.U.’s Federal System: Thwarting a Trade Deal with Canada

Dwarfed by the arduous trade negotiations between the E.U. and U.S., the E.U. and Canada actually completed negotiations on a free-trade deal in February, 2016. Ratification had to be pushed back from the fall. The drag from the “deep suspicion over the benefits of unrestricted trade” that was increasing globally was ostensibly the reason.[1] I contend that the true obstacle was the amount of sovereignty that the E.U. states still retained in the Union. Americans can think back to the Articles of Confederation as having the same major drawback. In the E.U.’s case, however, the Union had evolved past being a confederation, given the governmental sovereignty already at the federal level. The veto-power of a state government was thus out of place, and thus an obstacle for the E.U. even in fulfilling its existing responsibilities at the federal level.

The complete essay is at Essays on Two Federal Empires.

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[1] Paul Vieira, “Antitrade Sentiment Thwarts Talks,” The Wall Street Journal, August 30, 2016.

Biblical Positive-Thinking Applied to Leadership

“I can do all things through Christ which strengtheneth me.”[1] This biblical verse captures the extraordinary optimism of Norman Vincent Peale. Belief, expectation, and faith—his pillars of the Christian religion—are internals that can move mountains and thus get results. This biblically-based recipe for positive thinking can be applied to leadership, which, after all, is results-oriented. Its desired objective is of course the realization of a vision. Simply put, if religion can be used to do better in a job as Peale insists,[2] this holds for the task of leading other people, which consists of formulating and selling a vision.

The essay is at "Biblical Positive-Thinking." A fuller version is a chapter of Christianized Ethical Leadership. 

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1. Phil. 4:13. Cited from Norman Vincent Peale, The Power of Positive Thinking (New York: Touchstone, 2015), p. 3.

2. Norman Peale, Power of Positive Thinking, p. 48

For-Profits Cutting Corners in Higher Education

In my hometown, a local college decided to become a university. Not that the institution was expanding; the draw was tuition money from foreign students whose governments required that aid be given only to foreign universities. So overnight, departments became colleges. The underlying mentality, I submit, is that of forsaking what an institution is and so claiming to be something it’s not in order to get more money. In short, the underlying mentality is more, more, more, even if this means being something an institution is not. The change comes off as pretentious and greedy. The mentality is also in the mix when for-profit colleges take advantage of the U.S. student-loan program to the extent that they become financially dependent on the subsidized loans. Furthermore, some for-profits turn non-profit as a way to avoid oversight without losing the financial benefits of being for-profit. The trend points to an increasing decadence in American higher-education. The good news is that between 2011 and 2016, the enrollments at the major non-profit schools dropped by more than half; the “pullback came as the government clamped down on aggressive recruiting practices and stricter policies intended to ensure that schools are preparing students for gainful employment.”[1] Even the assumption that the purpose of a college is to train students for jobs rather than educate to make students knowledgeable. I suspect that the latter mission ironically makes for better hires among graduates.

The full essay is at "For-Profits Cutting Corners."

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1. Mellisa Korn, “Loan Curbs Shut College,” The Wall Street Journal, September 7, 2016.

California Passes Stricter Pollution Targets: Bringing Business Around

California’s legislature approved a bill (SB 32) in August, 2016 that extends the climate targets from reducing greenhouse-gas emissions from 1990 levels by 2020 (the former target) to just 40 percent of 1990 levels by 2030.[1] A second law, which includes increased legislative oversight of California regulators and targets refineries in poor areas, passed as well. Diane Regas of the Environmental Defense Fund pointed to California’s climate leadership. “As major economies work under the Paris Agreement to strengthen their plans to cut pollution and boost clean energy, California, once again, is setting a new standard for climate leadership worldwide.”[2] At first glance, it would seem that the legislature had freed itself from big business to pass the bills, but the sector itself was split. I submit the anticipation of a refreshed “cap and trade” program as an alternative (or mitigating factor) to stricter regulations played a role. Simply put, using the market mechanism in government regulation makes the stricter targets more palatable to market-based enterprises.

The full essay is at "California on Greenhouse Gases."

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1. Chris Megerian, “’A Real Commitment Backed Up by Real Power’: Gov. Jerry Brown to Sign Sweeping New Climate legislation,” Los Angeles Times, August 25, 2016.

2. “Landmark Climate Bill Passed by California Legislature,” August 26, 2016.

Global Markets and London Overreact to the British Vote to Secede from the E.U.: Missing the Bright Spots

The world’s financial sector may be excessively sensitive to increasing uncertainty associated with major changes—that is, changes that impact how large institutions, including governments, relate to each other. In such cases, so much is at stake that forces (i.e., the major powers) tend to manage the large-scale change with a minimum of disturbance. In short, the status quo has too much at stake for the market’s feared uncertainty to actualize. The British referendum on whether the E.U. state should secede is a case in point.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Big Soda Campaigning against a Proposed Tax in San Francisco: A Vested Interest Thwarting Democracy?

With a proposed 1-cent per ounce tax on sweetened beverages such as soda-pop on the 2016 ballot in Oakland and San Francisco, the effected industry reserved about $9.5 million in television-ad time.[1] As of August 10^th, the American Beverage Association had already spent $747,267 on campaign consultants and advertisements against the proposed tax in Oakland, whereas supporters of the proposal had spent only $23,297.[2] The imbalance itself could mean that business was subverting democracy by overwhelming voters. If big-soda’s ads were unethical as the pro-tax camp contended, the subversion would be especially harmful.

The full essay is at "Big Soda Campaigning."

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1. Michael McLaughlin, “Big Soda Spends Millions on ‘Unethical’ San Francisco Area Ads Fighting Drink Taxes,” The Huffington Post, August 24, 2016.

2. Darwin Graham, “Big Soda Is Spending Big Money Against Oakland Surary Beverage Tax Proposal,” East Bay Express, August 10, 2016.

Apollo Global Flew Too Close to the Sun: Personal and Institutional Conflicts of Interest

I submit that people tend to get more upset over the exploitation of personal conflicts of interest than the institutional sort. That is to say, our blood boils when we learn of another person contravening a duty in order to gain financially, yet we don’t mind when a CPA firm falsely gives a qualified opinion on an audit so the company being audited will continue with that audit firm the following year. Logically, as the money involved is more in the case of the CPA firm and individuals within the firm stand to benefit personally as the firm is enriched by the continued business, yet even so, we cannot stand direct personal enrichment resulting from a conflict of interest. In August, 2016, Apollo Global, a large private equity firm, settled with the SEC. Both personal and institutional conflicts of interest brought on the $53 million fine. Hence, this case is useful in comparing the two sorts of conflicts of interest.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Homeless “Campers” Starting Wildfires: Outside the Social Contract

Nederland, Colorado. A town in Boulder County that had embraced marijuana dispensaries for profit, found itself just outside a wildfire that burned 600 acres in July, 2016. Two homeless men were charged with fourth-degree arson for failing to put out their camp fire. The townsfolk reacted in anger, pointing to the increasing number of homeless people in the nearby national forest. Officials had been forced to deal with “more emergency calls, drug overdoses, illegal fires and trash piles deep in the woods.”[1] Some residents urged the U.S. Forest Service to crack down on the homeless by imposing tighter rules on camping, or banning it altogether in certain parts of the woods most popular with the homeless. An analysis drawing on the political philosophy of Thomas Hobbes, a seventeenth-century English philosopher can be employed to reveal a broader perspective on the problem.

The full essay is at "Homeless Campers."

 

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1. Jack Healy, “As Homeless Find Refuge in Forests, ‘Anger is Palpable’ in Nearby Towns,” The New York Times, August 21, 2016.

Hillary Clinton's Extreme Reckless with National Security: A Rigged Justrice Department or Falling Short of Gross Negligence?

In July, 2016, the FBI came to the conclusion that while Hillary Clinton was serving as U.S. Secretary of State, she risked classified information by using private computer servers for email and other purposes. The FBI’s director explicitly stated that she had been extremely reckless. In legal terms, that means gross negligence. At the time, a 99-year-old statute whereby gross negligence is sufficient for a fine or imprisonment of up to ten years was still on the books. Whether or not the person knew the actions were wrong is not relevant to the statute, and thus the enforcement.  So it was perplexing to a significant number of Americans—including prosecutors and other lawyers—that the FBI director did not recommend prosecution. Crucially, extremely reckless is the same as gross negligence in legal terms.

The full essay is at "Extreme Recklessness."

On the Business Ethics and Technology of Self-Driving Cars at Tesla

During the summer of 2016, Tesla was under fire with charges regarding the technology and ethics. Both of these issues can be put into a wider perspective in the company’s favor. Put another way, both technological and ethical analyses can be enhanced by putting the specific problems within a larger perspective—even in terms of time.

The full essay is in Cases of Unethical Business: A Malignant Mentality of Mendacity, available in print and as an ebook at Amazon.